Purpose of Guinea in British monetary history
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Financial
The guinea is a coin that was minted in the Kingdom of England and later in the Kingdom of Great Britain and the United Kingdom between 1663 and 1814. It was the first English machine-struck gold coin, originally worth one pound sterling, equal to twenty shillings; but rises in the price of gold relative to silver caused the value of the guinea to increase, at times to as high as thirty shillings; from 1717 until 1816, its value was officially fixed at twenty-one shillings. Following that, Great Britain adopted the gold standard and guinea became a colloquial or specialised term.
So: pound sterling was silver; guinea was created as a gold coin equivalent to it, but then the commodity prices diverged.
See also Bimetallism.
Social
Guinea was used to quote doctor's fees et al:
Even after the coin ceased to circulate, the name guinea was long used to indicate the amount of 21 shillings (£1.05 in decimalised currency). The guinea had an aristocratic overtone; professional fees and payment for land, horses, art, bespoke tailoring, furniture and other luxury items were often quoted in guineas until a couple of years after decimalisation in 1971. It was similarly used in Australia until that country went to decimal currency in 1966.
It is still quoted in the pricing and sale of livestock at auction and racehorses, where the purchaser will pay in guineas but the seller will receive payment in an equal number of pounds. The difference (5p in each guinea) is traditionally the auctioneer's commission. Many major horse races in Great Britain, Ireland, Canada, New Zealand and Australia bear names ending in "1,000 Guineas" or "2,000 Guineas", even though the nominal values of their purses today are much higher than the £1,050 or £2,100 suggested by their names.
Update
This social use was, actually, the reason for guinea's endurance. The British society is very stratified and social status clues are important. Quoting the price in guineas (gold coins) conveyed the "high society" image, so people keep doing it even now (see above).
Upvote:8
The reason for this involves the difference between wholesale and retail trade. Wholesale trade and banking was conducted in gold (guineas), retail in silver (pounds sterling). The reason for the price difference was to provide a commission. A common practice in England was to conduct wholesale business in trade auctions. The price would be quoted in guineas, but tendered in pounds. The auctioneer pocketed the difference as his commission.
In other words what happens is this:
1) auctioneer puts a lot of hides up for sale which closes at 5 guineas
2) wholesale buyer pays auctioneer 5 guineas and receives hides
3) auctioneer pays merchant 5 pounds
The difference between the two payments is the auctioneer's commission.
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